By Andrew Taylor ASSOCIATED PRESS
Senate Democrats Tuesday proposed quintupling the tax that oil companies pay into a spill liability fund as they seek to pare back a House-passed tax hike on investment fund managers.
The tax changes are being made as the Senate again takes up legislation extending unemployment benefits and a variety of expired tax breaks for both individuals and businesses. The measure would add about $80 billion to the deficit over the upcoming decade, the Congressional Budget Office said.
Majority Leader Harry Reid, Nevada Democrat, also proposed restoring $24 billion in aid to cash-strapped states to help them pay for their Medicaid budgets next year. Deficit concerns prompted House leaders to scrap a companion plan last month, generating criticism from governors and labor unions, who say that without the funding, states would have to lay off workers and make other painful budget cuts to make up for the budget shortfall.
The legislation unveiled Tuesday would raise the tax on oil produced off shore from 8 cents to 41 cents per barrel. That’s 9 cents higher than legislation that passed the House last month. The move to increase the tax would raise $15 billion over the coming decade as Congress seeks to shore up the fund in the wake of the catastrophic spill in the Gulf of Mexico.
But it’s also being used to ease a tax hike passed by the House on investment fund managers and to help pay for other tax cuts.
Typically, fund managers get a fee to manage funds or assets. They also get a share of the profits earned for investors above a certain level.
Those shares of profits, called carried interest, are taxed as capital gains, with a top rate of 15 percent. The House bill would tax 75 percent of the fees as regular income, which has a top tax rate of 35 percent but is set to rise to 39.6 percent in 2011.
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